Attack on PJM Markets Exhibits Zombie-Like Resilience

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As you may recall, in April 2017, DOE Secretary Perry launched a study of U.S. power system reliability expressing concerns over baseload coal and nuclear retirements.  By August, DOE released the study, which pinned coal and nuclear retirements on cheap natural gas, debunked reliability concerns, and identified opportunities to improve grid resilience.

Undeterred, in September 2017, Perry compelled FERC to open a proceeding on grid resilience, further proposing market-wrecking guaranteed compensation for generators that store 90-days of fuel on site (i.e. coal and nuclear). By January 2018, FERC had rejected Perry’s resilience proposal, and initiated a new docket to explore in earnest the issue of grid resilience and potential solutions. 

You would have thought the idea of guaranteed compensation for coal and nuclear plants in order to “save” the grid was dead. But, this policy idea has zombie-like resilience. It just won’t stop.

On March 28, FirstEnergy Solutions notified PJM that three of its nuclear power plants—Davis-Besse, Beaver Valley, and Perry—representing over 4 gigawatts of capacity would be deactivated or sold within the next three years.

On March 29, FirstEnergy Solutions Corporation asked the DOE to declare an emergency condition in PJM Interconnection, and to use the department’s emergency authority under section 202(c) of the Federal Power Act (FPA) to provide cost-plus-returns based compensation for all (not just FirstEnergy owned) coal and nuclear power plants that have 25 days of fuel on site and are located in PJM. This would involve plant-by-plant contracting with the eligible generators for a term of no less than four years or longer, until PJM markets are fixed. (Note: section 202 orders are usually in place for less than 90 days)

FirstEnergy’s letter assails PJM and FERC for failing to do more to prevent coal and nuclear retirements, criticizes competitive markets, and warns of an imminent reliability crisis related to things like overdependence on natural gas generation and pipeline fuel delivery issues. The letter urges immediate action for issuance of an emergency order and lays out the company’s case for why DOE has the legal authority to address the “crisis” in PJM.

DOE subsequently opened a public comment opportunity on the general issue of the deparment’s use of FPA emergency authorities. However, the Trump administration denied a similar request to use 202 authorities to save coal power plants proposed by Murray Energy Corp CEO Bob Murray in 2017, stating the evidence didn’t support use of emergency authority. (Note: Murray Energy supplies fuel to many of FirstEnergy’s coal plants.)

On March 30, PJM sent DOE a 2-page letter responding to FirstEnergy’s request.  The letter refrained from a point-by-point rebuttal to FirstEnergy’s claims, and instead conveyed two main points to DOE: 1) PJM has a FERC-approved process for evaluating reliability concerns related to generator deactivations that can take up to 90 days, and DOE should allow that process to unfold, and 2) there is no immediate threat to system reliability in PJM.

After months of anticipation, on March 31, FirstEnergy Corp announced its competitive generation subsidiaries—seven debtor companies including FirstEnergy Solutions (FES) and FirstEnergy Nuclear Operating Company (FENOC)—filed chapter 11 bankruptcy paperwork in the Northern District of Ohio, with the intent to restructure and continue operations. The company listed $7.2 billion in assets and $3 billion in debts, and over 3,076 employees associated with the debtor companies. Longer term, First Energy plans on exiting the competitive generation business.

The National Energy Technology Laboratory (NETL) issued a report in March about the role of baseload plants in RTO/ISOs during extreme weather events, focusing on the “bomb cyclone” from December 27, 2017 through January 8, 2018, and raising concerns about the ability to maintain reliability in PJM without coal (and nuclear) resources. FirstEnergy’s emergency order request to DOE relied in part on the NETL report to back up its crisis claims.

PJM issued a scathing rebuttal to the NETL coal report on April 13. PJM clarified that increased reliance on coal units during the bomb cyclone was the result of economic dispatch not lack of gas generator availability. As cold-weather demand for gas caused the price of natural gas to increase, coal became more competitive in the market and was dispatched earlier in the resource stack. NETL asserts that without these coal resources PJM would have faced “shortfalls leading to interconnection-wide blackouts,” yet never acknowledged PJM reserves were over 23% of peak load demand, nor that PJM hadn’t even declared emergency conditions. Further, PJM points out NETL associated the increased use of coal with natural gas fuel supply issues, but only 13% of forced outages were related to natural gas fuel supplies.  

Since FirstEnergy’s emergency order request, Secretary Perry has been on the record stating that economics is not the issue DOE is focusing on for the emergency order evaluation. He later stated that coal and nuclear retirements are putting national security at risk by threatening the reliability of the power supply. FERC Chair McIntyre recently hinted an entire category of generators (e.g. coal) exiting the market could be harmful to the nation's interest. 

So what can we conclude from all this?

There is no reliability crisis in PJM, but there is clearly a financial crisis at FirstEnergy. PJM is under persistent (i.e. zombie-style) attack by DOE and resource owners seeking swift support for economically struggling units. It is unlikely DOE will be able to quickly issue emergency orders and provide financial assistance to FirstEnergy, due to lack of evidence and anticipated legal challenges. However, action by FERC may eventually materialize.

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As you may recall, in April 2017, DOE Secretary Perry launched a study of U.S. power system reliability expressing concerns over baseload coal and nuclear retirements.  By August, DOE released the study, which pinned coal and nuclear retirements on cheap natural gas, debunked reliability concerns, and identified opportunities to improve grid resilience.

Undeterred, in September 2017, Perry compelled FERC to open a proceeding on grid resilience, further proposing market-wrecking guaranteed compensation for generators that store 90-days of fuel on site (i.e. coal and nuclear). By January 2018, FERC had rejected Perry’s resilience proposal, and initiated a new docket to explore in earnest the issue of grid resilience and potential solutions. 

You would have thought the idea of guaranteed compensation for coal and nuclear plants in order to “save” the grid was dead. But, this policy idea has zombie-like resilience. It just won’t stop.

On March 28, FirstEnergy Solutions notified PJM that three of its nuclear power plants—Davis-Besse, Beaver Valley, and Perry—representing over 4 gigawatts of capacity would be deactivated or sold within the next three years.

On March 29, FirstEnergy Solutions Corporation asked the DOE to declare an emergency condition in PJM Interconnection, and to use the department’s emergency authority under section 202(c) of the Federal Power Act (FPA) to provide cost-plus-returns based compensation for all (not just FirstEnergy owned) coal and nuclear power plants that have 25 days of fuel on site and are located in PJM. This would involve plant-by-plant contracting with the eligible generators for a term of no less than four years or longer, until PJM markets are fixed. (Note: section 202 orders are usually in place for less than 90 days)

FirstEnergy’s letter assails PJM and FERC for failing to do more to prevent coal and nuclear retirements, criticizes competitive markets, and warns of an imminent reliability crisis related to things like overdependence on natural gas generation and pipeline fuel delivery issues. The letter urges immediate action for issuance of an emergency order and lays out the company’s case for why DOE has the legal authority to address the “crisis” in PJM.

DOE subsequently opened a public comment opportunity on the general issue of the deparment’s use of FPA emergency authorities. However, the Trump administration denied a similar request to use 202 authorities to save coal power plants proposed by Murray Energy Corp CEO Bob Murray in 2017, stating the evidence didn’t support use of emergency authority. (Note: Murray Energy supplies fuel to many of FirstEnergy’s coal plants.)

On March 30, PJM sent DOE a 2-page letter responding to FirstEnergy’s request.  The letter refrained from a point-by-point rebuttal to FirstEnergy’s claims, and instead conveyed two main points to DOE: 1) PJM has a FERC-approved process for evaluating reliability concerns related to generator deactivations that can take up to 90 days, and DOE should allow that process to unfold, and 2) there is no immediate threat to system reliability in PJM.

After months of anticipation, on March 31, FirstEnergy Corp announced its competitive generation subsidiaries—seven debtor companies including FirstEnergy Solutions (FES) and FirstEnergy Nuclear Operating Company (FENOC)—filed chapter 11 bankruptcy paperwork in the Northern District of Ohio, with the intent to restructure and continue operations. The company listed $7.2 billion in assets and $3 billion in debts, and over 3,076 employees associated with the debtor companies. Longer term, First Energy plans on exiting the competitive generation business.

The National Energy Technology Laboratory (NETL) issued a report in March about the role of baseload plants in RTO/ISOs during extreme weather events, focusing on the “bomb cyclone” from December 27, 2017 through January 8, 2018, and raising concerns about the ability to maintain reliability in PJM without coal (and nuclear) resources. FirstEnergy’s emergency order request to DOE relied in part on the NETL report to back up its crisis claims.

PJM issued a scathing rebuttal to the NETL coal report on April 13. PJM clarified that increased reliance on coal units during the bomb cyclone was the result of economic dispatch not lack of gas generator availability. As cold-weather demand for gas caused the price of natural gas to increase, coal became more competitive in the market and was dispatched earlier in the resource stack. NETL asserts that without these coal resources PJM would have faced “shortfalls leading to interconnection-wide blackouts,” yet never acknowledged PJM reserves were over 23% of peak load demand, nor that PJM hadn’t even declared emergency conditions. Further, PJM points out NETL associated the increased use of coal with natural gas fuel supply issues, but only 13% of forced outages were related to natural gas fuel supplies.  

Since FirstEnergy’s emergency order request, Secretary Perry has been on the record stating that economics is not the issue DOE is focusing on for the emergency order evaluation. He later stated that coal and nuclear retirements are putting national security at risk by threatening the reliability of the power supply. FERC Chair McIntyre recently hinted an entire category of generators (e.g. coal) exiting the market could be harmful to the nation's interest. 

So what can we conclude from all this?

There is no reliability crisis in PJM, but there is clearly a financial crisis at FirstEnergy. PJM is under persistent (i.e. zombie-style) attack by DOE and resource owners seeking swift support for economically struggling units. It is unlikely DOE will be able to quickly issue emergency orders and provide financial assistance to FirstEnergy, due to lack of evidence and anticipated legal challenges. However, action by FERC may eventually materialize.

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Christina Simeone is a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. She is also the former director of policy and external affairs at the Kleinman Center for Energy Policy. While at the Kleinman Center, Christina engaged in applied research—bringing together analytics, academics, and industry insights—to further the center's mission.

Prior to joining the Kleinman Center, Simeone served as the director of the PennFuture Energy Center for Enterprise and the Environment, where she focused on energy and climate issues that impact Pennsylvania. Simeone worked on federal energy and climate legislation as policy director at the Alliance for Climate Protection in Washington, D.C., after spending several years in Harrisburg at the Pennsylvania Department of Environmental Protection (PA DEP), where she worked on climate and energy issues in the Policy Office and as special assistant to the secretary. Additionally, she has experience in private environmental consulting and in the financial management sector.

Simeone holds a master's degree in environmental studies from the University of Pennsylvania, a B.A. in economics from the University of Miami, and B.S. in music industry from Drexel University (with a concentration in opera and piano performance). She is a board member of Philadelphia's Sustainable Energy Fund, former chair of the Climate Change Advisory Committee to the PA DEP, and former co-chair to Governor Wolf's transition team for the PA DEP.

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Christina Simeone is a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. She is also the former director of policy and external affairs at the Kleinman Center for Energy Policy. While at the Kleinman Center, Christina engaged in applied research—bringing together analytics, academics, and industry insights—to further the center's mission.

Prior to joining the Kleinman Center, Simeone served as the director of the PennFuture Energy Center for Enterprise and the Environment, where she focused on energy and climate issues that impact Pennsylvania. Simeone worked on federal energy and climate legislation as policy director at the Alliance for Climate Protection in Washington, D.C., after spending several years in Harrisburg at the Pennsylvania Department of Environmental Protection (PA DEP), where she worked on climate and energy issues in the Policy Office and as special assistant to the secretary. Additionally, she has experience in private environmental consulting and in the financial management sector.

Simeone holds a master's degree in environmental studies from the University of Pennsylvania, a B.A. in economics from the University of Miami, and B.S. in music industry from Drexel University (with a concentration in opera and piano performance). She is a board member of Philadelphia's Sustainable Energy Fund, former chair of the Climate Change Advisory Committee to the PA DEP, and former co-chair to Governor Wolf's transition team for the PA DEP.

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is a senior fellow at the Kleinman Center for Energy Policy and a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. 

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After being rebuked by FERC and in the run up to bankruptcy declaration, FirstEnergy's generation arm appeals to DOE to use emergency authority to grant subsidies to all coal and nuclear generators in PJM.

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Christina Simeone is a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. She is also the former director of policy and external affairs at the Kleinman Center for Energy Policy. While at the Kleinman Center, Christina engaged in applied research—bringing together analytics, academics, and industry insights—to further the center's mission.

Prior to joining the Kleinman Center, Simeone served as the director of the PennFuture Energy Center for Enterprise and the Environment, where she focused on energy and climate issues that impact Pennsylvania. Simeone worked on federal energy and climate legislation as policy director at the Alliance for Climate Protection in Washington, D.C., after spending several years in Harrisburg at the Pennsylvania Department of Environmental Protection (PA DEP), where she worked on climate and energy issues in the Policy Office and as special assistant to the secretary. Additionally, she has experience in private environmental consulting and in the financial management sector.

Simeone holds a master's degree in environmental studies from the University of Pennsylvania, a B.A. in economics from the University of Miami, and B.S. in music industry from Drexel University (with a concentration in opera and piano performance). She is a board member of Philadelphia's Sustainable Energy Fund, former chair of the Climate Change Advisory Committee to the PA DEP, and former co-chair to Governor Wolf's transition team for the PA DEP.

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Christina Simeone is a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. She is also the former director of policy and external affairs at the Kleinman Center for Energy Policy. While at the Kleinman Center, Christina engaged in applied research—bringing together analytics, academics, and industry insights—to further the center's mission.

Prior to joining the Kleinman Center, Simeone served as the director of the PennFuture Energy Center for Enterprise and the Environment, where she focused on energy and climate issues that impact Pennsylvania. Simeone worked on federal energy and climate legislation as policy director at the Alliance for Climate Protection in Washington, D.C., after spending several years in Harrisburg at the Pennsylvania Department of Environmental Protection (PA DEP), where she worked on climate and energy issues in the Policy Office and as special assistant to the secretary. Additionally, she has experience in private environmental consulting and in the financial management sector.

Simeone holds a master's degree in environmental studies from the University of Pennsylvania, a B.A. in economics from the University of Miami, and B.S. in music industry from Drexel University (with a concentration in opera and piano performance). She is a board member of Philadelphia's Sustainable Energy Fund, former chair of the Climate Change Advisory Committee to the PA DEP, and former co-chair to Governor Wolf's transition team for the PA DEP.

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is a senior fellow at the Kleinman Center for Energy Policy and a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. 

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Christina Simeone is a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. She is also the former director of policy and external affairs at the Kleinman Center for Energy Policy. While at the Kleinman Center, Christina engaged in applied research—bringing together analytics, academics, and industry insights—to further the center's mission.

Prior to joining the Kleinman Center, Simeone served as the director of the PennFuture Energy Center for Enterprise and the Environment, where she focused on energy and climate issues that impact Pennsylvania. Simeone worked on federal energy and climate legislation as policy director at the Alliance for Climate Protection in Washington, D.C., after spending several years in Harrisburg at the Pennsylvania Department of Environmental Protection (PA DEP), where she worked on climate and energy issues in the Policy Office and as special assistant to the secretary. Additionally, she has experience in private environmental consulting and in the financial management sector.

Simeone holds a master's degree in environmental studies from the University of Pennsylvania, a B.A. in economics from the University of Miami, and B.S. in music industry from Drexel University (with a concentration in opera and piano performance). She is a board member of Philadelphia's Sustainable Energy Fund, former chair of the Climate Change Advisory Committee to the PA DEP, and former co-chair to Governor Wolf's transition team for the PA DEP.

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Christina Simeone is a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. She is also the former director of policy and external affairs at the Kleinman Center for Energy Policy. While at the Kleinman Center, Christina engaged in applied research—bringing together analytics, academics, and industry insights—to further the center's mission.

Prior to joining the Kleinman Center, Simeone served as the director of the PennFuture Energy Center for Enterprise and the Environment, where she focused on energy and climate issues that impact Pennsylvania. Simeone worked on federal energy and climate legislation as policy director at the Alliance for Climate Protection in Washington, D.C., after spending several years in Harrisburg at the Pennsylvania Department of Environmental Protection (PA DEP), where she worked on climate and energy issues in the Policy Office and as special assistant to the secretary. Additionally, she has experience in private environmental consulting and in the financial management sector.

Simeone holds a master's degree in environmental studies from the University of Pennsylvania, a B.A. in economics from the University of Miami, and B.S. in music industry from Drexel University (with a concentration in opera and piano performance). She is a board member of Philadelphia's Sustainable Energy Fund, former chair of the Climate Change Advisory Committee to the PA DEP, and former co-chair to Governor Wolf's transition team for the PA DEP.

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Christina Simeone is a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. She is also the former director of policy and external affairs at the Kleinman Center for Energy Policy. While at the Kleinman Center, Christina engaged in applied research—bringing together analytics, academics, and industry insights—to further the center's mission.

Prior to joining the Kleinman Center, Simeone served as the director of the PennFuture Energy Center for Enterprise and the Environment, where she focused on energy and climate issues that impact Pennsylvania. Simeone worked on federal energy and climate legislation as policy director at the Alliance for Climate Protection in Washington, D.C., after spending several years in Harrisburg at the Pennsylvania Department of Environmental Protection (PA DEP), where she worked on climate and energy issues in the Policy Office and as special assistant to the secretary. Additionally, she has experience in private environmental consulting and in the financial management sector.

Simeone holds a master's degree in environmental studies from the University of Pennsylvania, a B.A. in economics from the University of Miami, and B.S. in music industry from Drexel University (with a concentration in opera and piano performance). She is a board member of Philadelphia's Sustainable Energy Fund, former chair of the Climate Change Advisory Committee to the PA DEP, and former co-chair to Governor Wolf's transition team for the PA DEP.

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Christina Simeone is a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. She is also the former director of policy and external affairs at the Kleinman Center for Energy Policy. While at the Kleinman Center, Christina engaged in applied research—bringing together analytics, academics, and industry insights—to further the center's mission.

Prior to joining the Kleinman Center, Simeone served as the director of the PennFuture Energy Center for Enterprise and the Environment, where she focused on energy and climate issues that impact Pennsylvania. Simeone worked on federal energy and climate legislation as policy director at the Alliance for Climate Protection in Washington, D.C., after spending several years in Harrisburg at the Pennsylvania Department of Environmental Protection (PA DEP), where she worked on climate and energy issues in the Policy Office and as special assistant to the secretary. Additionally, she has experience in private environmental consulting and in the financial management sector.

Simeone holds a master's degree in environmental studies from the University of Pennsylvania, a B.A. in economics from the University of Miami, and B.S. in music industry from Drexel University (with a concentration in opera and piano performance). She is a board member of Philadelphia's Sustainable Energy Fund, former chair of the Climate Change Advisory Committee to the PA DEP, and former co-chair to Governor Wolf's transition team for the PA DEP.

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is a senior fellow at the Kleinman Center for Energy Policy and a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. 

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As you may recall, in April 2017, DOE Secretary Perry launched a study of U.S. power system reliability expressing concerns over baseload coal and nuclear retirements.  By August, DOE released the study, which pinned coal and nuclear retirements on cheap natural gas, debunked reliability concerns, and identified opportunities to improve grid resilience.

Undeterred, in September 2017, Perry compelled FERC to open a proceeding on grid resilience, further proposing market-wrecking guaranteed compensation for generators that store 90-days of fuel on site (i.e. coal and nuclear). By January 2018, FERC had rejected Perry’s resilience proposal, and initiated a new docket to explore in earnest the issue of grid resilience and potential solutions. 

You would have thought the idea of guaranteed compensation for coal and nuclear plants in order to “save” the grid was dead. But, this policy idea has zombie-like resilience. It just won’t stop.

On March 28, FirstEnergy Solutions notified PJM that three of its nuclear power plants—Davis-Besse, Beaver Valley, and Perry—representing over 4 gigawatts of capacity would be deactivated or sold within the next three years.

On March 29, FirstEnergy Solutions Corporation asked the DOE to declare an emergency condition in PJM Interconnection, and to use the department’s emergency authority under section 202(c) of the Federal Power Act (FPA) to provide cost-plus-returns based compensation for all (not just FirstEnergy owned) coal and nuclear power plants that have 25 days of fuel on site and are located in PJM. This would involve plant-by-plant contracting with the eligible generators for a term of no less than four years or longer, until PJM markets are fixed. (Note: section 202 orders are usually in place for less than 90 days)

FirstEnergy’s letter assails PJM and FERC for failing to do more to prevent coal and nuclear retirements, criticizes competitive markets, and warns of an imminent reliability crisis related to things like overdependence on natural gas generation and pipeline fuel delivery issues. The letter urges immediate action for issuance of an emergency order and lays out the company’s case for why DOE has the legal authority to address the “crisis” in PJM.

DOE subsequently opened a public comment opportunity on the general issue of the deparment’s use of FPA emergency authorities. However, the Trump administration denied a similar request to use 202 authorities to save coal power plants proposed by Murray Energy Corp CEO Bob Murray in 2017, stating the evidence didn’t support use of emergency authority. (Note: Murray Energy supplies fuel to many of FirstEnergy’s coal plants.)

On March 30, PJM sent DOE a 2-page letter responding to FirstEnergy’s request.  The letter refrained from a point-by-point rebuttal to FirstEnergy’s claims, and instead conveyed two main points to DOE: 1) PJM has a FERC-approved process for evaluating reliability concerns related to generator deactivations that can take up to 90 days, and DOE should allow that process to unfold, and 2) there is no immediate threat to system reliability in PJM.

After months of anticipation, on March 31, FirstEnergy Corp announced its competitive generation subsidiaries—seven debtor companies including FirstEnergy Solutions (FES) and FirstEnergy Nuclear Operating Company (FENOC)—filed chapter 11 bankruptcy paperwork in the Northern District of Ohio, with the intent to restructure and continue operations. The company listed $7.2 billion in assets and $3 billion in debts, and over 3,076 employees associated with the debtor companies. Longer term, First Energy plans on exiting the competitive generation business.

The National Energy Technology Laboratory (NETL) issued a report in March about the role of baseload plants in RTO/ISOs during extreme weather events, focusing on the “bomb cyclone” from December 27, 2017 through January 8, 2018, and raising concerns about the ability to maintain reliability in PJM without coal (and nuclear) resources. FirstEnergy’s emergency order request to DOE relied in part on the NETL report to back up its crisis claims.

PJM issued a scathing rebuttal to the NETL coal report on April 13. PJM clarified that increased reliance on coal units during the bomb cyclone was the result of economic dispatch not lack of gas generator availability. As cold-weather demand for gas caused the price of natural gas to increase, coal became more competitive in the market and was dispatched earlier in the resource stack. NETL asserts that without these coal resources PJM would have faced “shortfalls leading to interconnection-wide blackouts,” yet never acknowledged PJM reserves were over 23% of peak load demand, nor that PJM hadn’t even declared emergency conditions. Further, PJM points out NETL associated the increased use of coal with natural gas fuel supply issues, but only 13% of forced outages were related to natural gas fuel supplies.  

Since FirstEnergy’s emergency order request, Secretary Perry has been on the record stating that economics is not the issue DOE is focusing on for the emergency order evaluation. He later stated that coal and nuclear retirements are putting national security at risk by threatening the reliability of the power supply. FERC Chair McIntyre recently hinted an entire category of generators (e.g. coal) exiting the market could be harmful to the nation's interest. 

So what can we conclude from all this?

There is no reliability crisis in PJM, but there is clearly a financial crisis at FirstEnergy. PJM is under persistent (i.e. zombie-style) attack by DOE and resource owners seeking swift support for economically struggling units. It is unlikely DOE will be able to quickly issue emergency orders and provide financial assistance to FirstEnergy, due to lack of evidence and anticipated legal challenges. However, action by FERC may eventually materialize.

[summary] => [format] => full_html [safe_value] =>

As you may recall, in April 2017, DOE Secretary Perry launched a study of U.S. power system reliability expressing concerns over baseload coal and nuclear retirements.  By August, DOE released the study, which pinned coal and nuclear retirements on cheap natural gas, debunked reliability concerns, and identified opportunities to improve grid resilience.

Undeterred, in September 2017, Perry compelled FERC to open a proceeding on grid resilience, further proposing market-wrecking guaranteed compensation for generators that store 90-days of fuel on site (i.e. coal and nuclear). By January 2018, FERC had rejected Perry’s resilience proposal, and initiated a new docket to explore in earnest the issue of grid resilience and potential solutions. 

You would have thought the idea of guaranteed compensation for coal and nuclear plants in order to “save” the grid was dead. But, this policy idea has zombie-like resilience. It just won’t stop.

On March 28, FirstEnergy Solutions notified PJM that three of its nuclear power plants—Davis-Besse, Beaver Valley, and Perry—representing over 4 gigawatts of capacity would be deactivated or sold within the next three years.

On March 29, FirstEnergy Solutions Corporation asked the DOE to declare an emergency condition in PJM Interconnection, and to use the department’s emergency authority under section 202(c) of the Federal Power Act (FPA) to provide cost-plus-returns based compensation for all (not just FirstEnergy owned) coal and nuclear power plants that have 25 days of fuel on site and are located in PJM. This would involve plant-by-plant contracting with the eligible generators for a term of no less than four years or longer, until PJM markets are fixed. (Note: section 202 orders are usually in place for less than 90 days)

FirstEnergy’s letter assails PJM and FERC for failing to do more to prevent coal and nuclear retirements, criticizes competitive markets, and warns of an imminent reliability crisis related to things like overdependence on natural gas generation and pipeline fuel delivery issues. The letter urges immediate action for issuance of an emergency order and lays out the company’s case for why DOE has the legal authority to address the “crisis” in PJM.

DOE subsequently opened a public comment opportunity on the general issue of the deparment’s use of FPA emergency authorities. However, the Trump administration denied a similar request to use 202 authorities to save coal power plants proposed by Murray Energy Corp CEO Bob Murray in 2017, stating the evidence didn’t support use of emergency authority. (Note: Murray Energy supplies fuel to many of FirstEnergy’s coal plants.)

On March 30, PJM sent DOE a 2-page letter responding to FirstEnergy’s request.  The letter refrained from a point-by-point rebuttal to FirstEnergy’s claims, and instead conveyed two main points to DOE: 1) PJM has a FERC-approved process for evaluating reliability concerns related to generator deactivations that can take up to 90 days, and DOE should allow that process to unfold, and 2) there is no immediate threat to system reliability in PJM.

After months of anticipation, on March 31, FirstEnergy Corp announced its competitive generation subsidiaries—seven debtor companies including FirstEnergy Solutions (FES) and FirstEnergy Nuclear Operating Company (FENOC)—filed chapter 11 bankruptcy paperwork in the Northern District of Ohio, with the intent to restructure and continue operations. The company listed $7.2 billion in assets and $3 billion in debts, and over 3,076 employees associated with the debtor companies. Longer term, First Energy plans on exiting the competitive generation business.

The National Energy Technology Laboratory (NETL) issued a report in March about the role of baseload plants in RTO/ISOs during extreme weather events, focusing on the “bomb cyclone” from December 27, 2017 through January 8, 2018, and raising concerns about the ability to maintain reliability in PJM without coal (and nuclear) resources. FirstEnergy’s emergency order request to DOE relied in part on the NETL report to back up its crisis claims.

PJM issued a scathing rebuttal to the NETL coal report on April 13. PJM clarified that increased reliance on coal units during the bomb cyclone was the result of economic dispatch not lack of gas generator availability. As cold-weather demand for gas caused the price of natural gas to increase, coal became more competitive in the market and was dispatched earlier in the resource stack. NETL asserts that without these coal resources PJM would have faced “shortfalls leading to interconnection-wide blackouts,” yet never acknowledged PJM reserves were over 23% of peak load demand, nor that PJM hadn’t even declared emergency conditions. Further, PJM points out NETL associated the increased use of coal with natural gas fuel supply issues, but only 13% of forced outages were related to natural gas fuel supplies.  

Since FirstEnergy’s emergency order request, Secretary Perry has been on the record stating that economics is not the issue DOE is focusing on for the emergency order evaluation. He later stated that coal and nuclear retirements are putting national security at risk by threatening the reliability of the power supply. FERC Chair McIntyre recently hinted an entire category of generators (e.g. coal) exiting the market could be harmful to the nation's interest. 

So what can we conclude from all this?

There is no reliability crisis in PJM, but there is clearly a financial crisis at FirstEnergy. PJM is under persistent (i.e. zombie-style) attack by DOE and resource owners seeking swift support for economically struggling units. It is unlikely DOE will be able to quickly issue emergency orders and provide financial assistance to FirstEnergy, due to lack of evidence and anticipated legal challenges. However, action by FERC may eventually materialize.

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Christina Simeone is a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. She is also the former director of policy and external affairs at the Kleinman Center for Energy Policy. While at the Kleinman Center, Christina engaged in applied research—bringing together analytics, academics, and industry insights—to further the center's mission.

Prior to joining the Kleinman Center, Simeone served as the director of the PennFuture Energy Center for Enterprise and the Environment, where she focused on energy and climate issues that impact Pennsylvania. Simeone worked on federal energy and climate legislation as policy director at the Alliance for Climate Protection in Washington, D.C., after spending several years in Harrisburg at the Pennsylvania Department of Environmental Protection (PA DEP), where she worked on climate and energy issues in the Policy Office and as special assistant to the secretary. Additionally, she has experience in private environmental consulting and in the financial management sector.

Simeone holds a master's degree in environmental studies from the University of Pennsylvania, a B.A. in economics from the University of Miami, and B.S. in music industry from Drexel University (with a concentration in opera and piano performance). She is a board member of Philadelphia's Sustainable Energy Fund, former chair of the Climate Change Advisory Committee to the PA DEP, and former co-chair to Governor Wolf's transition team for the PA DEP.

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Christina Simeone is a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. She is also the former director of policy and external affairs at the Kleinman Center for Energy Policy. While at the Kleinman Center, Christina engaged in applied research—bringing together analytics, academics, and industry insights—to further the center's mission.

Prior to joining the Kleinman Center, Simeone served as the director of the PennFuture Energy Center for Enterprise and the Environment, where she focused on energy and climate issues that impact Pennsylvania. Simeone worked on federal energy and climate legislation as policy director at the Alliance for Climate Protection in Washington, D.C., after spending several years in Harrisburg at the Pennsylvania Department of Environmental Protection (PA DEP), where she worked on climate and energy issues in the Policy Office and as special assistant to the secretary. Additionally, she has experience in private environmental consulting and in the financial management sector.

Simeone holds a master's degree in environmental studies from the University of Pennsylvania, a B.A. in economics from the University of Miami, and B.S. in music industry from Drexel University (with a concentration in opera and piano performance). She is a board member of Philadelphia's Sustainable Energy Fund, former chair of the Climate Change Advisory Committee to the PA DEP, and former co-chair to Governor Wolf's transition team for the PA DEP.

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is a senior fellow at the Kleinman Center for Energy Policy and a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. 

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After being rebuked by FERC and in the run up to bankruptcy declaration, FirstEnergy's generation arm appeals to DOE to use emergency authority to grant subsidies to all coal and nuclear generators in PJM.

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After being rebuked by FERC and in the run up to bankruptcy declaration, FirstEnergy's generation arm appeals to DOE to use emergency authority to grant subsidies to all coal and nuclear generators in PJM.

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As you may recall, in April 2017, DOE Secretary Perry launched a study of U.S. power system reliability expressing concerns over baseload coal and nuclear retirements.  By August, DOE released the study, which pinned coal and nuclear retirements on cheap natural gas, debunked reliability concerns, and identified opportunities to improve grid resilience.

Undeterred, in September 2017, Perry compelled FERC to open a proceeding on grid resilience, further proposing market-wrecking guaranteed compensation for generators that store 90-days of fuel on site (i.e. coal and nuclear). By January 2018, FERC had rejected Perry’s resilience proposal, and initiated a new docket to explore in earnest the issue of grid resilience and potential solutions. 

You would have thought the idea of guaranteed compensation for coal and nuclear plants in order to “save” the grid was dead. But, this policy idea has zombie-like resilience. It just won’t stop.

On March 28, FirstEnergy Solutions notified PJM that three of its nuclear power plants—Davis-Besse, Beaver Valley, and Perry—representing over 4 gigawatts of capacity would be deactivated or sold within the next three years.

On March 29, FirstEnergy Solutions Corporation asked the DOE to declare an emergency condition in PJM Interconnection, and to use the department’s emergency authority under section 202(c) of the Federal Power Act (FPA) to provide cost-plus-returns based compensation for all (not just FirstEnergy owned) coal and nuclear power plants that have 25 days of fuel on site and are located in PJM. This would involve plant-by-plant contracting with the eligible generators for a term of no less than four years or longer, until PJM markets are fixed. (Note: section 202 orders are usually in place for less than 90 days)

FirstEnergy’s letter assails PJM and FERC for failing to do more to prevent coal and nuclear retirements, criticizes competitive markets, and warns of an imminent reliability crisis related to things like overdependence on natural gas generation and pipeline fuel delivery issues. The letter urges immediate action for issuance of an emergency order and lays out the company’s case for why DOE has the legal authority to address the “crisis” in PJM.

DOE subsequently opened a public comment opportunity on the general issue of the deparment’s use of FPA emergency authorities. However, the Trump administration denied a similar request to use 202 authorities to save coal power plants proposed by Murray Energy Corp CEO Bob Murray in 2017, stating the evidence didn’t support use of emergency authority. (Note: Murray Energy supplies fuel to many of FirstEnergy’s coal plants.)

On March 30, PJM sent DOE a 2-page letter responding to FirstEnergy’s request.  The letter refrained from a point-by-point rebuttal to FirstEnergy’s claims, and instead conveyed two main points to DOE: 1) PJM has a FERC-approved process for evaluating reliability concerns related to generator deactivations that can take up to 90 days, and DOE should allow that process to unfold, and 2) there is no immediate threat to system reliability in PJM.

After months of anticipation, on March 31, FirstEnergy Corp announced its competitive generation subsidiaries—seven debtor companies including FirstEnergy Solutions (FES) and FirstEnergy Nuclear Operating Company (FENOC)—filed chapter 11 bankruptcy paperwork in the Northern District of Ohio, with the intent to restructure and continue operations. The company listed $7.2 billion in assets and $3 billion in debts, and over 3,076 employees associated with the debtor companies. Longer term, First Energy plans on exiting the competitive generation business.

The National Energy Technology Laboratory (NETL) issued a report in March about the role of baseload plants in RTO/ISOs during extreme weather events, focusing on the “bomb cyclone” from December 27, 2017 through January 8, 2018, and raising concerns about the ability to maintain reliability in PJM without coal (and nuclear) resources. FirstEnergy’s emergency order request to DOE relied in part on the NETL report to back up its crisis claims.

PJM issued a scathing rebuttal to the NETL coal report on April 13. PJM clarified that increased reliance on coal units during the bomb cyclone was the result of economic dispatch not lack of gas generator availability. As cold-weather demand for gas caused the price of natural gas to increase, coal became more competitive in the market and was dispatched earlier in the resource stack. NETL asserts that without these coal resources PJM would have faced “shortfalls leading to interconnection-wide blackouts,” yet never acknowledged PJM reserves were over 23% of peak load demand, nor that PJM hadn’t even declared emergency conditions. Further, PJM points out NETL associated the increased use of coal with natural gas fuel supply issues, but only 13% of forced outages were related to natural gas fuel supplies.  

Since FirstEnergy’s emergency order request, Secretary Perry has been on the record stating that economics is not the issue DOE is focusing on for the emergency order evaluation. He later stated that coal and nuclear retirements are putting national security at risk by threatening the reliability of the power supply. FERC Chair McIntyre recently hinted an entire category of generators (e.g. coal) exiting the market could be harmful to the nation's interest. 

So what can we conclude from all this?

There is no reliability crisis in PJM, but there is clearly a financial crisis at FirstEnergy. PJM is under persistent (i.e. zombie-style) attack by DOE and resource owners seeking swift support for economically struggling units. It is unlikely DOE will be able to quickly issue emergency orders and provide financial assistance to FirstEnergy, due to lack of evidence and anticipated legal challenges. However, action by FERC may eventually materialize.

[summary] => [format] => full_html [safe_value] =>

As you may recall, in April 2017, DOE Secretary Perry launched a study of U.S. power system reliability expressing concerns over baseload coal and nuclear retirements.  By August, DOE released the study, which pinned coal and nuclear retirements on cheap natural gas, debunked reliability concerns, and identified opportunities to improve grid resilience.

Undeterred, in September 2017, Perry compelled FERC to open a proceeding on grid resilience, further proposing market-wrecking guaranteed compensation for generators that store 90-days of fuel on site (i.e. coal and nuclear). By January 2018, FERC had rejected Perry’s resilience proposal, and initiated a new docket to explore in earnest the issue of grid resilience and potential solutions. 

You would have thought the idea of guaranteed compensation for coal and nuclear plants in order to “save” the grid was dead. But, this policy idea has zombie-like resilience. It just won’t stop.

On March 28, FirstEnergy Solutions notified PJM that three of its nuclear power plants—Davis-Besse, Beaver Valley, and Perry—representing over 4 gigawatts of capacity would be deactivated or sold within the next three years.

On March 29, FirstEnergy Solutions Corporation asked the DOE to declare an emergency condition in PJM Interconnection, and to use the department’s emergency authority under section 202(c) of the Federal Power Act (FPA) to provide cost-plus-returns based compensation for all (not just FirstEnergy owned) coal and nuclear power plants that have 25 days of fuel on site and are located in PJM. This would involve plant-by-plant contracting with the eligible generators for a term of no less than four years or longer, until PJM markets are fixed. (Note: section 202 orders are usually in place for less than 90 days)

FirstEnergy’s letter assails PJM and FERC for failing to do more to prevent coal and nuclear retirements, criticizes competitive markets, and warns of an imminent reliability crisis related to things like overdependence on natural gas generation and pipeline fuel delivery issues. The letter urges immediate action for issuance of an emergency order and lays out the company’s case for why DOE has the legal authority to address the “crisis” in PJM.

DOE subsequently opened a public comment opportunity on the general issue of the deparment’s use of FPA emergency authorities. However, the Trump administration denied a similar request to use 202 authorities to save coal power plants proposed by Murray Energy Corp CEO Bob Murray in 2017, stating the evidence didn’t support use of emergency authority. (Note: Murray Energy supplies fuel to many of FirstEnergy’s coal plants.)

On March 30, PJM sent DOE a 2-page letter responding to FirstEnergy’s request.  The letter refrained from a point-by-point rebuttal to FirstEnergy’s claims, and instead conveyed two main points to DOE: 1) PJM has a FERC-approved process for evaluating reliability concerns related to generator deactivations that can take up to 90 days, and DOE should allow that process to unfold, and 2) there is no immediate threat to system reliability in PJM.

After months of anticipation, on March 31, FirstEnergy Corp announced its competitive generation subsidiaries—seven debtor companies including FirstEnergy Solutions (FES) and FirstEnergy Nuclear Operating Company (FENOC)—filed chapter 11 bankruptcy paperwork in the Northern District of Ohio, with the intent to restructure and continue operations. The company listed $7.2 billion in assets and $3 billion in debts, and over 3,076 employees associated with the debtor companies. Longer term, First Energy plans on exiting the competitive generation business.

The National Energy Technology Laboratory (NETL) issued a report in March about the role of baseload plants in RTO/ISOs during extreme weather events, focusing on the “bomb cyclone” from December 27, 2017 through January 8, 2018, and raising concerns about the ability to maintain reliability in PJM without coal (and nuclear) resources. FirstEnergy’s emergency order request to DOE relied in part on the NETL report to back up its crisis claims.

PJM issued a scathing rebuttal to the NETL coal report on April 13. PJM clarified that increased reliance on coal units during the bomb cyclone was the result of economic dispatch not lack of gas generator availability. As cold-weather demand for gas caused the price of natural gas to increase, coal became more competitive in the market and was dispatched earlier in the resource stack. NETL asserts that without these coal resources PJM would have faced “shortfalls leading to interconnection-wide blackouts,” yet never acknowledged PJM reserves were over 23% of peak load demand, nor that PJM hadn’t even declared emergency conditions. Further, PJM points out NETL associated the increased use of coal with natural gas fuel supply issues, but only 13% of forced outages were related to natural gas fuel supplies.  

Since FirstEnergy’s emergency order request, Secretary Perry has been on the record stating that economics is not the issue DOE is focusing on for the emergency order evaluation. He later stated that coal and nuclear retirements are putting national security at risk by threatening the reliability of the power supply. FERC Chair McIntyre recently hinted an entire category of generators (e.g. coal) exiting the market could be harmful to the nation's interest. 

So what can we conclude from all this?

There is no reliability crisis in PJM, but there is clearly a financial crisis at FirstEnergy. PJM is under persistent (i.e. zombie-style) attack by DOE and resource owners seeking swift support for economically struggling units. It is unlikely DOE will be able to quickly issue emergency orders and provide financial assistance to FirstEnergy, due to lack of evidence and anticipated legal challenges. However, action by FERC may eventually materialize.

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Christina Simeone is a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. She is also the former director of policy and external affairs at the Kleinman Center for Energy Policy. While at the Kleinman Center, Christina engaged in applied research—bringing together analytics, academics, and industry insights—to further the center's mission.

Prior to joining the Kleinman Center, Simeone served as the director of the PennFuture Energy Center for Enterprise and the Environment, where she focused on energy and climate issues that impact Pennsylvania. Simeone worked on federal energy and climate legislation as policy director at the Alliance for Climate Protection in Washington, D.C., after spending several years in Harrisburg at the Pennsylvania Department of Environmental Protection (PA DEP), where she worked on climate and energy issues in the Policy Office and as special assistant to the secretary. Additionally, she has experience in private environmental consulting and in the financial management sector.

Simeone holds a master's degree in environmental studies from the University of Pennsylvania, a B.A. in economics from the University of Miami, and B.S. in music industry from Drexel University (with a concentration in opera and piano performance). She is a board member of Philadelphia's Sustainable Energy Fund, former chair of the Climate Change Advisory Committee to the PA DEP, and former co-chair to Governor Wolf's transition team for the PA DEP.

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Christina Simeone is a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. She is also the former director of policy and external affairs at the Kleinman Center for Energy Policy. While at the Kleinman Center, Christina engaged in applied research—bringing together analytics, academics, and industry insights—to further the center's mission.

Prior to joining the Kleinman Center, Simeone served as the director of the PennFuture Energy Center for Enterprise and the Environment, where she focused on energy and climate issues that impact Pennsylvania. Simeone worked on federal energy and climate legislation as policy director at the Alliance for Climate Protection in Washington, D.C., after spending several years in Harrisburg at the Pennsylvania Department of Environmental Protection (PA DEP), where she worked on climate and energy issues in the Policy Office and as special assistant to the secretary. Additionally, she has experience in private environmental consulting and in the financial management sector.

Simeone holds a master's degree in environmental studies from the University of Pennsylvania, a B.A. in economics from the University of Miami, and B.S. in music industry from Drexel University (with a concentration in opera and piano performance). She is a board member of Philadelphia's Sustainable Energy Fund, former chair of the Climate Change Advisory Committee to the PA DEP, and former co-chair to Governor Wolf's transition team for the PA DEP.

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is a senior fellow at the Kleinman Center for Energy Policy and a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. 

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After being rebuked by FERC and in the run up to bankruptcy declaration, FirstEnergy's generation arm appeals to DOE to use emergency authority to grant subsidies to all coal and nuclear generators in PJM.

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After being rebuked by FERC and in the run up to bankruptcy declaration, FirstEnergy's generation arm appeals to DOE to use emergency authority to grant subsidies to all coal and nuclear generators in PJM.

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As you may recall, in April 2017, DOE Secretary Perry launched a study of U.S. power system reliability expressing concerns over baseload coal and nuclear retirements.  By August, DOE released the study, which pinned coal and nuclear retirements on cheap natural gas, debunked reliability concerns, and identified opportunities to improve grid resilience.

Undeterred, in September 2017, Perry compelled FERC to open a proceeding on grid resilience, further proposing market-wrecking guaranteed compensation for generators that store 90-days of fuel on site (i.e. coal and nuclear). By January 2018, FERC had rejected Perry’s resilience proposal, and initiated a new docket to explore in earnest the issue of grid resilience and potential solutions. 

You would have thought the idea of guaranteed compensation for coal and nuclear plants in order to “save” the grid was dead. But, this policy idea has zombie-like resilience. It just won’t stop.

On March 28, FirstEnergy Solutions notified PJM that three of its nuclear power plants—Davis-Besse, Beaver Valley, and Perry—representing over 4 gigawatts of capacity would be deactivated or sold within the next three years.

On March 29, FirstEnergy Solutions Corporation asked the DOE to declare an emergency condition in PJM Interconnection, and to use the department’s emergency authority under section 202(c) of the Federal Power Act (FPA) to provide cost-plus-returns based compensation for all (not just FirstEnergy owned) coal and nuclear power plants that have 25 days of fuel on site and are located in PJM. This would involve plant-by-plant contracting with the eligible generators for a term of no less than four years or longer, until PJM markets are fixed. (Note: section 202 orders are usually in place for less than 90 days)

FirstEnergy’s letter assails PJM and FERC for failing to do more to prevent coal and nuclear retirements, criticizes competitive markets, and warns of an imminent reliability crisis related to things like overdependence on natural gas generation and pipeline fuel delivery issues. The letter urges immediate action for issuance of an emergency order and lays out the company’s case for why DOE has the legal authority to address the “crisis” in PJM.

DOE subsequently opened a public comment opportunity on the general issue of the deparment’s use of FPA emergency authorities. However, the Trump administration denied a similar request to use 202 authorities to save coal power plants proposed by Murray Energy Corp CEO Bob Murray in 2017, stating the evidence didn’t support use of emergency authority. (Note: Murray Energy supplies fuel to many of FirstEnergy’s coal plants.)

On March 30, PJM sent DOE a 2-page letter responding to FirstEnergy’s request.  The letter refrained from a point-by-point rebuttal to FirstEnergy’s claims, and instead conveyed two main points to DOE: 1) PJM has a FERC-approved process for evaluating reliability concerns related to generator deactivations that can take up to 90 days, and DOE should allow that process to unfold, and 2) there is no immediate threat to system reliability in PJM.

After months of anticipation, on March 31, FirstEnergy Corp announced its competitive generation subsidiaries—seven debtor companies including FirstEnergy Solutions (FES) and FirstEnergy Nuclear Operating Company (FENOC)—filed chapter 11 bankruptcy paperwork in the Northern District of Ohio, with the intent to restructure and continue operations. The company listed $7.2 billion in assets and $3 billion in debts, and over 3,076 employees associated with the debtor companies. Longer term, First Energy plans on exiting the competitive generation business.

The National Energy Technology Laboratory (NETL) issued a report in March about the role of baseload plants in RTO/ISOs during extreme weather events, focusing on the “bomb cyclone” from December 27, 2017 through January 8, 2018, and raising concerns about the ability to maintain reliability in PJM without coal (and nuclear) resources. FirstEnergy’s emergency order request to DOE relied in part on the NETL report to back up its crisis claims.

PJM issued a scathing rebuttal to the NETL coal report on April 13. PJM clarified that increased reliance on coal units during the bomb cyclone was the result of economic dispatch not lack of gas generator availability. As cold-weather demand for gas caused the price of natural gas to increase, coal became more competitive in the market and was dispatched earlier in the resource stack. NETL asserts that without these coal resources PJM would have faced “shortfalls leading to interconnection-wide blackouts,” yet never acknowledged PJM reserves were over 23% of peak load demand, nor that PJM hadn’t even declared emergency conditions. Further, PJM points out NETL associated the increased use of coal with natural gas fuel supply issues, but only 13% of forced outages were related to natural gas fuel supplies.  

Since FirstEnergy’s emergency order request, Secretary Perry has been on the record stating that economics is not the issue DOE is focusing on for the emergency order evaluation. He later stated that coal and nuclear retirements are putting national security at risk by threatening the reliability of the power supply. FERC Chair McIntyre recently hinted an entire category of generators (e.g. coal) exiting the market could be harmful to the nation's interest. 

So what can we conclude from all this?

There is no reliability crisis in PJM, but there is clearly a financial crisis at FirstEnergy. PJM is under persistent (i.e. zombie-style) attack by DOE and resource owners seeking swift support for economically struggling units. It is unlikely DOE will be able to quickly issue emergency orders and provide financial assistance to FirstEnergy, due to lack of evidence and anticipated legal challenges. However, action by FERC may eventually materialize.

[summary] => [format] => full_html [safe_value] =>

As you may recall, in April 2017, DOE Secretary Perry launched a study of U.S. power system reliability expressing concerns over baseload coal and nuclear retirements.  By August, DOE released the study, which pinned coal and nuclear retirements on cheap natural gas, debunked reliability concerns, and identified opportunities to improve grid resilience.

Undeterred, in September 2017, Perry compelled FERC to open a proceeding on grid resilience, further proposing market-wrecking guaranteed compensation for generators that store 90-days of fuel on site (i.e. coal and nuclear). By January 2018, FERC had rejected Perry’s resilience proposal, and initiated a new docket to explore in earnest the issue of grid resilience and potential solutions. 

You would have thought the idea of guaranteed compensation for coal and nuclear plants in order to “save” the grid was dead. But, this policy idea has zombie-like resilience. It just won’t stop.

On March 28, FirstEnergy Solutions notified PJM that three of its nuclear power plants—Davis-Besse, Beaver Valley, and Perry—representing over 4 gigawatts of capacity would be deactivated or sold within the next three years.

On March 29, FirstEnergy Solutions Corporation asked the DOE to declare an emergency condition in PJM Interconnection, and to use the department’s emergency authority under section 202(c) of the Federal Power Act (FPA) to provide cost-plus-returns based compensation for all (not just FirstEnergy owned) coal and nuclear power plants that have 25 days of fuel on site and are located in PJM. This would involve plant-by-plant contracting with the eligible generators for a term of no less than four years or longer, until PJM markets are fixed. (Note: section 202 orders are usually in place for less than 90 days)

FirstEnergy’s letter assails PJM and FERC for failing to do more to prevent coal and nuclear retirements, criticizes competitive markets, and warns of an imminent reliability crisis related to things like overdependence on natural gas generation and pipeline fuel delivery issues. The letter urges immediate action for issuance of an emergency order and lays out the company’s case for why DOE has the legal authority to address the “crisis” in PJM.

DOE subsequently opened a public comment opportunity on the general issue of the deparment’s use of FPA emergency authorities. However, the Trump administration denied a similar request to use 202 authorities to save coal power plants proposed by Murray Energy Corp CEO Bob Murray in 2017, stating the evidence didn’t support use of emergency authority. (Note: Murray Energy supplies fuel to many of FirstEnergy’s coal plants.)

On March 30, PJM sent DOE a 2-page letter responding to FirstEnergy’s request.  The letter refrained from a point-by-point rebuttal to FirstEnergy’s claims, and instead conveyed two main points to DOE: 1) PJM has a FERC-approved process for evaluating reliability concerns related to generator deactivations that can take up to 90 days, and DOE should allow that process to unfold, and 2) there is no immediate threat to system reliability in PJM.

After months of anticipation, on March 31, FirstEnergy Corp announced its competitive generation subsidiaries—seven debtor companies including FirstEnergy Solutions (FES) and FirstEnergy Nuclear Operating Company (FENOC)—filed chapter 11 bankruptcy paperwork in the Northern District of Ohio, with the intent to restructure and continue operations. The company listed $7.2 billion in assets and $3 billion in debts, and over 3,076 employees associated with the debtor companies. Longer term, First Energy plans on exiting the competitive generation business.

The National Energy Technology Laboratory (NETL) issued a report in March about the role of baseload plants in RTO/ISOs during extreme weather events, focusing on the “bomb cyclone” from December 27, 2017 through January 8, 2018, and raising concerns about the ability to maintain reliability in PJM without coal (and nuclear) resources. FirstEnergy’s emergency order request to DOE relied in part on the NETL report to back up its crisis claims.

PJM issued a scathing rebuttal to the NETL coal report on April 13. PJM clarified that increased reliance on coal units during the bomb cyclone was the result of economic dispatch not lack of gas generator availability. As cold-weather demand for gas caused the price of natural gas to increase, coal became more competitive in the market and was dispatched earlier in the resource stack. NETL asserts that without these coal resources PJM would have faced “shortfalls leading to interconnection-wide blackouts,” yet never acknowledged PJM reserves were over 23% of peak load demand, nor that PJM hadn’t even declared emergency conditions. Further, PJM points out NETL associated the increased use of coal with natural gas fuel supply issues, but only 13% of forced outages were related to natural gas fuel supplies.  

Since FirstEnergy’s emergency order request, Secretary Perry has been on the record stating that economics is not the issue DOE is focusing on for the emergency order evaluation. He later stated that coal and nuclear retirements are putting national security at risk by threatening the reliability of the power supply. FERC Chair McIntyre recently hinted an entire category of generators (e.g. coal) exiting the market could be harmful to the nation's interest. 

So what can we conclude from all this?

There is no reliability crisis in PJM, but there is clearly a financial crisis at FirstEnergy. PJM is under persistent (i.e. zombie-style) attack by DOE and resource owners seeking swift support for economically struggling units. It is unlikely DOE will be able to quickly issue emergency orders and provide financial assistance to FirstEnergy, due to lack of evidence and anticipated legal challenges. However, action by FERC may eventually materialize.

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Christina Simeone is a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. She is also the former director of policy and external affairs at the Kleinman Center for Energy Policy. While at the Kleinman Center, Christina engaged in applied research—bringing together analytics, academics, and industry insights—to further the center's mission.

Prior to joining the Kleinman Center, Simeone served as the director of the PennFuture Energy Center for Enterprise and the Environment, where she focused on energy and climate issues that impact Pennsylvania. Simeone worked on federal energy and climate legislation as policy director at the Alliance for Climate Protection in Washington, D.C., after spending several years in Harrisburg at the Pennsylvania Department of Environmental Protection (PA DEP), where she worked on climate and energy issues in the Policy Office and as special assistant to the secretary. Additionally, she has experience in private environmental consulting and in the financial management sector.

Simeone holds a master's degree in environmental studies from the University of Pennsylvania, a B.A. in economics from the University of Miami, and B.S. in music industry from Drexel University (with a concentration in opera and piano performance). She is a board member of Philadelphia's Sustainable Energy Fund, former chair of the Climate Change Advisory Committee to the PA DEP, and former co-chair to Governor Wolf's transition team for the PA DEP.

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Christina Simeone is a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. She is also the former director of policy and external affairs at the Kleinman Center for Energy Policy. While at the Kleinman Center, Christina engaged in applied research—bringing together analytics, academics, and industry insights—to further the center's mission.

Prior to joining the Kleinman Center, Simeone served as the director of the PennFuture Energy Center for Enterprise and the Environment, where she focused on energy and climate issues that impact Pennsylvania. Simeone worked on federal energy and climate legislation as policy director at the Alliance for Climate Protection in Washington, D.C., after spending several years in Harrisburg at the Pennsylvania Department of Environmental Protection (PA DEP), where she worked on climate and energy issues in the Policy Office and as special assistant to the secretary. Additionally, she has experience in private environmental consulting and in the financial management sector.

Simeone holds a master's degree in environmental studies from the University of Pennsylvania, a B.A. in economics from the University of Miami, and B.S. in music industry from Drexel University (with a concentration in opera and piano performance). She is a board member of Philadelphia's Sustainable Energy Fund, former chair of the Climate Change Advisory Committee to the PA DEP, and former co-chair to Governor Wolf's transition team for the PA DEP.

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is a senior fellow at the Kleinman Center for Energy Policy and a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. 

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is a senior fellow at the Kleinman Center for Energy Policy and a doctoral student in advanced energy systems at the Colorado School of Mines and the National Renewable Energy Laboratory, a joint program. 

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After being rebuked by FERC and in the run up to bankruptcy declaration, FirstEnergy's generation arm appeals to DOE to use emergency authority to grant subsidies to all coal and nuclear generators in PJM.

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After being rebuked by FERC and in the run up to bankruptcy declaration, FirstEnergy's generation arm appeals to DOE to use emergency authority to grant subsidies to all coal and nuclear generators in PJM.

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As you may recall, in April 2017, DOE Secretary Perry launched a study of U.S. power system reliability expressing concerns over baseload coal and nuclear retirements.  By August, DOE released the study, which pinned coal and nuclear retirements on cheap natural gas, debunked reliability concerns, and identified opportunities to improve grid resilience.

Undeterred, in September 2017, Perry compelled FERC to open a proceeding on grid resilience, further proposing market-wrecking guaranteed compensation for generators that store 90-days of fuel on site (i.e. coal and nuclear). By January 2018, FERC had rejected Perry’s resilience proposal, and initiated a new docket to explore in earnest the issue of grid resilience and potential solutions. 

You would have thought the idea of guaranteed compensation for coal and nuclear plants in order to “save” the grid was dead. But, this policy idea has zombie-like resilience. It just won’t stop.

On March 28, FirstEnergy Solutions notified PJM that three of its nuclear power plants—Davis-Besse, Beaver Valley, and Perry—representing over 4 gigawatts of capacity would be deactivated or sold within the next three years.

On March 29, FirstEnergy Solutions Corporation asked the DOE to declare an emergency condition in PJM Interconnection, and to use the department’s emergency authority under section 202(c) of the Federal Power Act (FPA) to provide cost-plus-returns based compensation for all (not just FirstEnergy owned) coal and nuclear power plants that have 25 days of fuel on site and are located in PJM. This would involve plant-by-plant contracting with the eligible generators for a term of no less than four years or longer, until PJM markets are fixed. (Note: section 202 orders are usually in place for less than 90 days)

FirstEnergy’s letter assails PJM and FERC for failing to do more to prevent coal and nuclear retirements, criticizes competitive markets, and warns of an imminent reliability crisis related to things like overdependence on natural gas generation and pipeline fuel delivery issues. The letter urges immediate action for issuance of an emergency order and lays out the company’s case for why DOE has the legal authority to address the “crisis” in PJM.

DOE subsequently opened a public comment opportunity on the general issue of the deparment’s use of FPA emergency authorities. However, the Trump administration denied a similar request to use 202 authorities to save coal power plants proposed by Murray Energy Corp CEO Bob Murray in 2017, stating the evidence didn’t support use of emergency authority. (Note: Murray Energy supplies fuel to many of FirstEnergy’s coal plants.)

On March 30, PJM sent DOE a 2-page letter responding to FirstEnergy’s request.  The letter refrained from a point-by-point rebuttal to FirstEnergy’s claims, and instead conveyed two main points to DOE: 1) PJM has a FERC-approved process for evaluating reliability concerns related to generator deactivations that can take up to 90 days, and DOE should allow that process to unfold, and 2) there is no immediate threat to system reliability in PJM.

After months of anticipation, on March 31, FirstEnergy Corp announced its competitive generation subsidiaries—seven debtor companies including FirstEnergy Solutions (FES) and FirstEnergy Nuclear Operating Company (FENOC)—filed chapter 11 bankruptcy paperwork in the Northern District of Ohio, with the intent to restructure and continue operations. The company listed $7.2 billion in assets and $3 billion in debts, and over 3,076 employees associated with the debtor companies. Longer term, First Energy plans on exiting the competitive generation business.

The National Energy Technology Laboratory (NETL) issued a report in March about the role of baseload plants in RTO/ISOs during extreme weather events, focusing on the “bomb cyclone” from December 27, 2017 through January 8, 2018, and raising concerns about the ability to maintain reliability in PJM without coal (and nuclear) resources. FirstEnergy’s emergency order request to DOE relied in part on the NETL report to back up its crisis claims.

PJM issued a scathing rebuttal to the NETL coal report on April 13. PJM clarified that increased reliance on coal units during the bomb cyclone was the result of economic dispatch not lack of gas generator availability. As cold-weather demand for gas caused the price of natural gas to increase, coal became more competitive in the market and was dispatched earlier in the resource stack. NETL asserts that without these coal resources PJM would have faced “shortfalls leading to interconnection-wide blackouts,” yet never acknowledged PJM reserves were over 23% of peak load demand, nor that PJM hadn’t even declared emergency conditions. Further, PJM points out NETL associated the increased use of coal with natural gas fuel supply issues, but only 13% of forced outages were related to natural gas fuel supplies.  

Since FirstEnergy’s emergency order request, Secretary Perry has been on the record stating that economics is not the issue DOE is focusing on for the emergency order evaluation. He later stated that coal and nuclear retirements are putting national security at risk by threatening the reliability of the power supply. FERC Chair McIntyre recently hinted an entire category of generators (e.g. coal) exiting the market could be harmful to the nation's interest. 

So what can we conclude from all this?

There is no reliability crisis in PJM, but there is clearly a financial crisis at FirstEnergy. PJM is under persistent (i.e. zombie-style) attack by DOE and resource owners seeking swift support for economically struggling units. It is unlikely DOE will be able to quickly issue emergency orders and provide financial assistance to FirstEnergy, due to lack of evidence and anticipated legal challenges. However, action by FERC may eventually materialize.

[summary] => [format] => full_html [safe_value] =>

As you may recall, in April 2017, DOE Secretary Perry launched a study of U.S. power system reliability expressing concerns over baseload coal and nuclear retirements.  By August, DOE released the study, which pinned coal and nuclear retirements on cheap natural gas, debunked reliability concerns, and identified opportunities to improve grid resilience.

Undeterred, in September 2017, Perry compelled FERC to open a proceeding on grid resilience, further proposing market-wrecking guaranteed compensation for generators that store 90-days of fuel on site (i.e. coal and nuclear). By January 2018, FERC had rejected Perry’s resilience proposal, and initiated a new docket to explore in earnest the issue of grid resilience and potential solutions. 

You would have thought the idea of guaranteed compensation for coal and nuclear plants in order to “save” the grid was dead. But, this policy idea has zombie-like resilience. It just won’t stop.

On March 28, FirstEnergy Solutions notified PJM that three of its nuclear power plants—Davis-Besse, Beaver Valley, and Perry—representing over 4 gigawatts of capacity would be deactivated or sold within the next three years.

On March 29, FirstEnergy Solutions Corporation asked the DOE to declare an emergency condition in PJM Interconnection, and to use the department’s emergency authority under section 202(c) of the Federal Power Act (FPA) to provide cost-plus-returns based compensation for all (not just FirstEnergy owned) coal and nuclear power plants that have 25 days of fuel on site and are located in PJM. This would involve plant-by-plant contracting with the eligible generators for a term of no less than four years or longer, until PJM markets are fixed. (Note: section 202 orders are usually in place for less than 90 days)

FirstEnergy’s letter assails PJM and FERC for failing to do more to prevent coal and nuclear retirements, criticizes competitive markets, and warns of an imminent reliability crisis related to things like overdependence on natural gas generation and pipeline fuel delivery issues. The letter urges immediate action for issuance of an emergency order and lays out the company’s case for why DOE has the legal authority to address the “crisis” in PJM.

DOE subsequently opened a public comment opportunity on the general issue of the deparment’s use of FPA emergency authorities. However, the Trump administration denied a similar request to use 202 authorities to save coal power plants proposed by Murray Energy Corp CEO Bob Murray in 2017, stating the evidence didn’t support use of emergency authority. (Note: Murray Energy supplies fuel to many of FirstEnergy’s coal plants.)

On March 30, PJM sent DOE a 2-page letter responding to FirstEnergy’s request.  The letter refrained from a point-by-point rebuttal to FirstEnergy’s claims, and instead conveyed two main points to DOE: 1) PJM has a FERC-approved process for evaluating reliability concerns related to generator deactivations that can take up to 90 days, and DOE should allow that process to unfold, and 2) there is no immediate threat to system reliability in PJM.

After months of anticipation, on March 31, FirstEnergy Corp announced its competitive generation subsidiaries—seven debtor companies including FirstEnergy Solutions (FES) and FirstEnergy Nuclear Operating Company (FENOC)—filed chapter 11 bankruptcy paperwork in the Northern District of Ohio, with the intent to restructure and continue operations. The company listed $7.2 billion in assets and $3 billion in debts, and over 3,076 employees associated with the debtor companies. Longer term, First Energy plans on exiting the competitive generation business.

The National Energy Technology Laboratory (NETL) issued a report in March about the role of baseload plants in RTO/ISOs during extreme weather events, focusing on the “bomb cyclone” from December 27, 2017 through January 8, 2018, and raising concerns about the ability to maintain reliability in PJM without coal (and nuclear) resources. FirstEnergy’s emergency order request to DOE relied in part on the NETL report to back up its crisis claims.

PJM issued a scathing rebuttal to the NETL coal report on April 13. PJM clarified that increased reliance on coal units during the bomb cyclone was the result of economic dispatch not lack of gas generator availability. As cold-weather demand for gas caused the price of natural gas to increase, coal became more competitive in the market and was dispatched earlier in the resource stack. NETL asserts that without these coal resources PJM would have faced “shortfalls leading to interconnection-wide blackouts,” yet never acknowledged PJM reserves were over 23% of peak load demand, nor that PJM hadn’t even declared emergency conditions. Further, PJM points out NETL associated the increased use of coal with natural gas fuel supply issues, but only 13% of forced outages were related to natural gas fuel supplies.  

Since FirstEnergy’s emergency order request, Secretary Perry has been on the record stating that economics is not the issue DOE is focusing on for the emergency order evaluation. He later stated that coal and nuclear retirements are putting national security at risk by threatening the reliability of the power supply. FERC Chair McIntyre recently hinted an entire category of generators (e.g. coal) exiting the market could be harmful to the nation's interest. 

So what can we conclude from all this?

There is no reliability crisis in PJM, but there is clearly a financial crisis at FirstEnergy. PJM is under persistent (i.e. zombie-style) attack by DOE and resource owners seeking swift support for economically struggling units. It is unlikely DOE will be able to quickly issue emergency orders and provide financial assistance to FirstEnergy, due to lack of evidence and anticipated legal challenges. However, action by FERC may eventually materialize.

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As you may recall, in April 2017, DOE Secretary Perry launched a study of U.S. power system reliability expressing concerns over baseload coal and nuclear retirements.  By August, DOE released the study, which pinned coal and nuclear retirements on cheap natural gas, debunked reliability concerns, and identified opportunities to improve grid resilience.

Undeterred, in September 2017, Perry compelled FERC to open a proceeding on grid resilience, further proposing market-wrecking guaranteed compensation for generators that store 90-days of fuel on site (i.e. coal and nuclear). By January 2018, FERC had rejected Perry’s resilience proposal, and initiated a new docket to explore in earnest the issue of grid resilience and potential solutions. 

You would have thought the idea of guaranteed compensation for coal and nuclear plants in order to “save” the grid was dead. But, this policy idea has zombie-like resilience. It just won’t stop.

On March 28, FirstEnergy Solutions notified PJM that three of its nuclear power plants—Davis-Besse, Beaver Valley, and Perry—representing over 4 gigawatts of capacity would be deactivated or sold within the next three years.

On March 29, FirstEnergy Solutions Corporation asked the DOE to declare an emergency condition in PJM Interconnection, and to use the department’s emergency authority under section 202(c) of the Federal Power Act (FPA) to provide cost-plus-returns based compensation for all (not just FirstEnergy owned) coal and nuclear power plants that have 25 days of fuel on site and are located in PJM. This would involve plant-by-plant contracting with the eligible generators for a term of no less than four years or longer, until PJM markets are fixed. (Note: section 202 orders are usually in place for less than 90 days)

FirstEnergy’s letter assails PJM and FERC for failing to do more to prevent coal and nuclear retirements, criticizes competitive markets, and warns of an imminent reliability crisis related to things like overdependence on natural gas generation and pipeline fuel delivery issues. The letter urges immediate action for issuance of an emergency order and lays out the company’s case for why DOE has the legal authority to address the “crisis” in PJM.

DOE subsequently opened a public comment opportunity on the general issue of the deparment’s use of FPA emergency authorities. However, the Trump administration denied a similar request to use 202 authorities to save coal power plants proposed by Murray Energy Corp CEO Bob Murray in 2017, stating the evidence didn’t support use of emergency authority. (Note: Murray Energy supplies fuel to many of FirstEnergy’s coal plants.)

On March 30, PJM sent DOE a 2-page letter responding to FirstEnergy’s request.  The letter refrained from a point-by-point rebuttal to FirstEnergy’s claims, and instead conveyed two main points to DOE: 1) PJM has a FERC-approved process for evaluating reliability concerns related to generator deactivations that can take up to 90 days, and DOE should allow that process to unfold, and 2) there is no immediate threat to system reliability in PJM.

After months of anticipation, on March 31, FirstEnergy Corp announced its competitive generation subsidiaries—seven debtor companies including FirstEnergy Solutions (FES) and FirstEnergy Nuclear Operating Company (FENOC)—filed chapter 11 bankruptcy paperwork in the Northern District of Ohio, with the intent to restructure and continue operations. The company listed $7.2 billion in assets and $3 billion in debts, and over 3,076 employees associated with the debtor companies. Longer term, First Energy plans on exiting the competitive generation business.

The National Energy Technology Laboratory (NETL) issued a report in March about the role of baseload plants in RTO/ISOs during extreme weather events, focusing on the “bomb cyclone” from December 27, 2017 through January 8, 2018, and raising concerns about the ability to maintain reliability in PJM without coal (and nuclear) resources. FirstEnergy’s emergency order request to DOE relied in part on the NETL report to back up its crisis claims.

PJM issued a scathing rebuttal to the NETL coal report on April 13. PJM clarified that increased reliance on coal units during the bomb cyclone was the result of economic dispatch not lack of gas generator availability. As cold-weather demand for gas caused the price of natural gas to increase, coal became more competitive in the market and was dispatched earlier in the resource stack. NETL asserts that without these coal resources PJM would have faced “shortfalls leading to interconnection-wide blackouts,” yet never acknowledged PJM reserves were over 23% of peak load demand, nor that PJM hadn’t even declared emergency conditions. Further, PJM points out NETL associated the increased use of coal with natural gas fuel supply issues, but only 13% of forced outages were related to natural gas fuel supplies.  

Since FirstEnergy’s emergency order request, Secretary Perry has been on the record stating that economics is not the issue DOE is focusing on for the emergency order evaluation. He later stated that coal and nuclear retirements are putting national security at risk by threatening the reliability of the power supply. FERC Chair McIntyre recently hinted an entire category of generators (e.g. coal) exiting the market could be harmful to the nation's interest. 

So what can we conclude from all this?

There is no reliability crisis in PJM, but there is clearly a financial crisis at FirstEnergy. PJM is under persistent (i.e. zombie-style) attack by DOE and resource owners seeking swift support for economically struggling units. It is unlikely DOE will be able to quickly issue emergency orders and provide financial assistance to FirstEnergy, due to lack of evidence and anticipated legal challenges. However, action by FERC may eventually materialize.

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Image Courtesy of Mendhak
April 18, 2018

As you may recall, in April 2017, DOE Secretary Perry launched a study of U.S. power system reliability expressing concerns over baseload coal and nuclear retirements.  By August, DOE released the study, which pinned coal and nuclear retirements on cheap natural gas, debunked reliability concerns, and identified opportunities to improve grid resilience.

Undeterred, in September 2017, Perry compelled FERC to open a proceeding on grid resilience, further proposing market-wrecking guaranteed compensation for generators that store 90-days of fuel on site (i.e. coal and nuclear). By January 2018, FERC had rejected Perry’s resilience proposal, and initiated a new docket to explore in earnest the issue of grid resilience and potential solutions. 

You would have thought the idea of guaranteed compensation for coal and nuclear plants in order to “save” the grid was dead. But, this policy idea has zombie-like resilience. It just won’t stop.

On March 28, FirstEnergy Solutions notified PJM that three of its nuclear power plants—Davis-Besse, Beaver Valley, and Perry—representing over 4 gigawatts of capacity would be deactivated or sold within the next three years.

On March 29, FirstEnergy Solutions Corporation asked the DOE to declare an emergency condition in PJM Interconnection, and to use the department’s emergency authority under section 202(c) of the Federal Power Act (FPA) to provide cost-plus-returns based compensation for all (not just FirstEnergy owned) coal and nuclear power plants that have 25 days of fuel on site and are located in PJM. This would involve plant-by-plant contracting with the eligible generators for a term of no less than four years or longer, until PJM markets are fixed. (Note: section 202 orders are usually in place for less than 90 days)

FirstEnergy’s letter assails PJM and FERC for failing to do more to prevent coal and nuclear retirements, criticizes competitive markets, and warns of an imminent reliability crisis related to things like overdependence on natural gas generation and pipeline fuel delivery issues. The letter urges immediate action for issuance of an emergency order and lays out the company’s case for why DOE has the legal authority to address the “crisis” in PJM.

DOE subsequently opened a public comment opportunity on the general issue of the deparment’s use of FPA emergency authorities. However, the Trump administration denied a similar request to use 202 authorities to save coal power plants proposed by Murray Energy Corp CEO Bob Murray in 2017, stating the evidence didn’t support use of emergency authority. (Note: Murray Energy supplies fuel to many of FirstEnergy’s coal plants.)

On March 30, PJM sent DOE a 2-page letter responding to FirstEnergy’s request.  The letter refrained from a point-by-point rebuttal to FirstEnergy’s claims, and instead conveyed two main points to DOE: 1) PJM has a FERC-approved process for evaluating reliability concerns related to generator deactivations that can take up to 90 days, and DOE should allow that process to unfold, and 2) there is no immediate threat to system reliability in PJM.

After months of anticipation, on March 31, FirstEnergy Corp announced its competitive generation subsidiaries—seven debtor companies including FirstEnergy Solutions (FES) and FirstEnergy Nuclear Operating Company (FENOC)—filed chapter 11 bankruptcy paperwork in the Northern District of Ohio, with the intent to restructure and continue operations. The company listed $7.2 billion in assets and $3 billion in debts, and over 3,076 employees associated with the debtor companies. Longer term, First Energy plans on exiting the competitive generation business.

The National Energy Technology Laboratory (NETL) issued a report in March about the role of baseload plants in RTO/ISOs during extreme weather events, focusing on the “bomb cyclone” from December 27, 2017 through January 8, 2018, and raising concerns about the ability to maintain reliability in PJM without coal (and nuclear) resources. FirstEnergy’s emergency order request to DOE relied in part on the NETL report to back up its crisis claims.

PJM issued a scathing rebuttal to the NETL coal report on April 13. PJM clarified that increased reliance on coal units during the bomb cyclone was the result of economic dispatch not lack of gas generator availability. As cold-weather demand for gas caused the price of natural gas to increase, coal became more competitive in the market and was dispatched earlier in the resource stack. NETL asserts that without these coal resources PJM would have faced “shortfalls leading to interconnection-wide blackouts,” yet never acknowledged PJM reserves were over 23% of peak load demand, nor that PJM hadn’t even declared emergency conditions. Further, PJM points out NETL associated the increased use of coal with natural gas fuel supply issues, but only 13% of forced outages were related to natural gas fuel supplies.  

Since FirstEnergy’s emergency order request, Secretary Perry has been on the record stating that economics is not the issue DOE is focusing on for the emergency order evaluation. He later stated that coal and nuclear retirements are putting national security at risk by threatening the reliability of the power supply. FERC Chair McIntyre recently hinted an entire category of generators (e.g. coal) exiting the market could be harmful to the nation's interest. 

So what can we conclude from all this?

There is no reliability crisis in PJM, but there is clearly a financial crisis at FirstEnergy. PJM is under persistent (i.e. zombie-style) attack by DOE and resource owners seeking swift support for economically struggling units. It is unlikely DOE will be able to quickly issue emergency orders and provide financial assistance to FirstEnergy, due to lack of evidence and anticipated legal challenges. However, action by FERC may eventually materialize.

Our blog highlights the research, opinions, and insights of individual authors. It does not represent the voice of the Kleinman Center.